GUWAHATI: The Rajasthan Authority for Advance Rulings (AAR) has determined that softy ice-cream mix is primarily a sugar-based product rather than a milk product, and will therefore be subject to an 18% Goods and Services Tax (GST).
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The ruling was made following an application by VRB Consumer Products, a private company, which sought clarification on the classification of its ‘Vanilla Mix.’ This product is sold to companies that use it in machines to produce soft-serve ice cream.
VRB Consumer Products had argued that its Vanilla Mix should be classified as a milk product under Heading 0404, which includes items with natural milk constituents, allowing it to qualify for a reduced GST rate of 5%. However, the AAR found that the mix consists of 61.2% sugar and only 34% milk solids. Due to the higher proportion of sugar, the ruling stated, "Milk solids are added to sugar, not the other way around."
Harpreet Singh, a Partner in Indirect Tax at Deloitte-India, noted that the ruling dismissed the classification of the product as a milk product, emphasising that multiple ingredients, including sugar, play significant roles in its composition.
This decision follows similar disputes over the GST classification of milk-based products. While fermented milk products like lassi have been exempt from GST, flavored milk was previously subjected to a 12% tax.